Answer to Question #23040 in Economics for vidhi sahal

Question

veblen effect

Answer 1

Veblen paradox (Veblen effect) is the situation when consumers perceive the price reduction of goods as a signal of their
quality or prestige decrease, and increase in prices, by contrast, makes the
product more attractive. This type of consumer behavior is called a paradox
because it conflicts with the basic law of demand, according to which the
increase in the product's price leads to a reduction in consumption. All
Veblen products are the premium segment, and as the prices are rising the
desire of target audience to have them also grow. The clearest
example - works of contemporary art. Veblen paradox was discovered by the
American sociologist, economist, journalist and futurist Thorstein Bunde
Veblen, author of "The Theory of the Leisure Class," "Theory of
Entrepreneurship" and others. Veblen introduced in economics and sociology
concept of "prestigious and conspicuous consumption," which will
remain in these sciences under his name. Another name of Veblen paradox
is the snob effect.